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Your credit – why it is important

If you've ever applied for a credit card, a personal loan, or insurance, there's a file about you. This file is known as your credit report. It is full of information on where you live, how you pay your bills, and whether you've had legal action brought against you or if you have filed for bankruptcy. Credit reporting companies who collect this data, sell the information in your report to creditors, insurers, employers, and other businesses with a legitimate need for it. They use the information to evaluate your creditworthiness on applications for credit, insurance, employment, or a lease.

Having a good credit report means it will be easier for you to qualify for loans and possibly receive lower interest rates. Lower interest rates usually translate into smaller monthly payments.

Nevertheless, newspapers, radio, TV, and the Internet are filled with ads for companies and services that promise to erase negative information on your credit report in exchange for a fee. Don't be fooled! The individuals who run these ads not only don't deliver — they can't deliver. Only time, deliberate effort, and a plan to repay your bills will improve your credit as it's detailed in your credit report.